Wizards have means to fight Dementors, humans do not. Also, the evil wizards really just want to kill non magic people anyway, so if all non magic people start attacking wizards, do you think they would form a fragile alliance type deal?

The easiest way would be to rally some wizard factions and have them put charms on muggle weapons for the armies to use.

Now the muggles may not be entirely unable to work any magic (possibly some potions that you just have to mix ingredients in the right way would be at their reach) and to support this I'll mention that dementors' basic curse is essentially depression, that people who are down are known to binge on chocolate, and that chocolate does break the dementor's influence. In that logic muggles have enough sense of magic to self-medicate against some curses. I think a muggle army would be able to use enchanted weapons or potions, as long as the magic is summoned materially and not through a wizard's mind.

As to why don't the wizards take over the world... obviously they're not very numerous, but why is that so? The majority of wizards' children are wizards, so either they don't have many children, or many of them die. Maybe the current peace that Voldemort is threatening is something new and that there were many unmentioned wars that cost them great numbers. Maybe the wizards don't try to take over the world because when a group grows in power, infighting grows in proportion, and magic makes them too deadly to survive this sort of conflicts. Repeated failures of controlling some lands in the past may have instituted a taboo against attempting it again. Although, again, Voldemort is disputing that too.